Logistics and the Logistics System

Logistics and the Logistics System

1. Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements”

   • objective
     • Is to get the right quantity and quality of materials (or services) to the right place at the right time, for the right client, and at the right price.

2. The entire process of logistics, which deals with the moving of materials into, through, and out of a firm, can be divided into three parts

   • 1. Inbound logistic
     • Which represents the movement and storage of materials received from suppliers;
   • 2. Materials management
     • Which covers the storage and flows of materials within a firm
   • 3. Outbound logistics or physical distribution
     • Which describes the movement and storage of products from the final production point to the customer

3. Types of flow

   • Information flow
     • The information flow is considered to be backward, so its main direction is from downstream to upstream elements
       • In regard to physical flow, the backward flow of product is referred to as reverse logistics
   • Physical flow
     • It is common to consider physical flow as the forward flow throughout the logistics network, the main direction of which is from the point of origin to the point of consumption.
       • The information flow is considered to be backward, so its main direction is from downstream to upstream elements
       • Physical Nature of the Product
         • Both the structure and the cost of a distribution system for a given product are directly affected by the product’s particular characteristics.
           • Special characteristics
           • Substitutability
           • Value-to-weight ratio
           • Volume-to-weight ratio
     • Components
       • Network design
       • Information
       • Transportation
       • Inventory
       • Warehousing, material handling, and packaging
     • Channels of Distribution
       • Types of distribution channels
         • physical
           • A physical distribution channel deals with the physical aspects of a product distribution, including all the methods, means, and entities through which the product is distributed from the supplier’s or manufacturer’s outlet to the end user.
         • Trading or transaction.
           • Trading or transaction channels are concerned with the nonphysical aspects of distributing products from their point of origin to their point of consumption
     • Warehousing and Storage
       • Warehousing plays a critical role in logistics systems, providing the desired customer-service levels in combination with other logistics activities
         • Basic functions
           • 1. Movement (material handling) 2. Storage (inventory holding) 3. Information transfer
       • Packaging and Unit Loads
         • Almost all the products flowing through logistics networks are packaged, mainly to promote or protect the product.
       • Storage and Handling Systems
         • Categories
           • palletized
           • nonpalletized

4. The Transportation System

   • Transportation accounts for between one-third and two-thirds of total logistics costs; for most firms, it is the most important single element of logistics costs
     • Options for moving products
       • Road
         • It now accounts for 39.8% of total cargo ton-miles, which is more than 68% of actual tonnage
       • Rail
         • Accounts for 37.1% of total freight ton-miles (more than 14% of actual tonnage) in the United States
           • Second dominant mode of transportation
       • Air
         • Only around 0.1% of ton-mile traffic in the United States
           • Although airfreight offers the shortest time in transit
       • Water
         • Accounts for 5% of total freight ton-miles (around 3.3% of actual tonnage) in the United States
           • The oldest mode of transportation
       • Pipelines
         • Pipeline systems were mainly developed for transporting large volumes of products, often over long distances.
           • Pipelines tend to be product specific, which means they are used for only one particular type of product throughout their design life
       • Digital
         • Digital or electronic transport is the fastest mode of transportation
           • Digital transport is cost efficient and benefits from its high accessibility and flexibility